Dollarization and the Earthquake: Two Manmade Disasters

On January 13, a major earthquake shook all of El Salvador, affecting over a million inhabitants who were still reeling from another national disaster that had hit only days earlier: the dollarization of the economy.

Ismael Moreno

Salvadoran society woke up uneasy on New Year’s Day. From that day forth, people would have to get used to making purchases with dollars as well as their own currency—the colón. The anxiety is not because people are unfamiliar with the dollar; in fact thousands if not millions of relatives working in the United States send dollar remittances home all the time, but the recipients tend to exchange them immediately for national currency.

What created such nervousness?

The tension was fed by the entire way Francisco Flores’ government handled the situation. First, it kept its decision to dollarize the economy a jealously guarded secret until a week before the Monetary Integration bill was sent to the National Assembly. Why had people not been consulted about the proposal, when it would have such an important impact on everyone’s life? And why, even after it was unilaterally decided, was the plan treated as the greatest state secret of recent years, kept even from sectors as decisive as business and banking leaders? These questions weighed in the air, feeding anxiety.

This legislation’s hasty approval, once it got to the legislative floor at the end of November, exacerbated the confusion. A simple majority of representatives from the ruling National Republican Alliance (ARENA), the Conservatives and the Christian Democrats approved it in a single session with little debate.
Last but not least was the government’s unparalleled propaganda campaign, which presented the dollar’s free circulation as a panacea to solve the country’s problems. Never before had people seen such an unremitting, aggressive publicity campaign as the one organized by the government in the days and weeks after the law was passed.

This was the context in which the first of the year rolled around. People were confused about how to handle the dollar, or how to combine the two currencies. Economists were uncertain about how to analyze the phenomenon and its possible impact on an economy as frail as El Salvador’s. While the government and a few representatives of the banking sector and private enterprise talked about a new path to paradise, the poor and middle class could see nothing but a dark tunnel into an unsure future. The one thing clear to everyone was that the country had entered a new era, as suggested by a banner headline in El Diario de Hoy on January 1: "Good Morning, El Salvador!"

Battling the dollar

By January 10, however, the country had declared open war on the dollar, as an avalanche of protests crashed down on the government. The 84 municipal governments controlled by the FMLN agreed to accept and pay only colóns. Demonstrations in several municipalities revealed both people’s deep unease about the new policy and their willingness to protest. The FMLN and various sectors of civil society decided to organize a huge march for January 16 to commemorate the ninth anniversary of the peace accords. Half a million posters were distributed all around the country with a resounding NO to Dollarization. The Supreme Court was lobbied to declare the Monetary Integration Law unconstitutional and demand its repeal. It was the first time the two competing tendencies within the FMLN had come together, a miracle brought about by the need to present a common front against dollarization. A "campaign center" was established like the one set up for the elections, but this one included representatives from both tendencies, in full agreement on their objectives and means of struggle.

During the first week of January, as confusion and protests united the vast majority of Salvadorans, the gap between their anxiety and the government’s propaganda widened. The President and his economic team publicly expressed satisfaction with the successful start of a new economic life under the banner of the dollar, while both organized and spontaneous protests it the dollar sprang up all over, especially at the markets and offices of FMLN-governed municipalities. The country’s most serious analysts evaluated the dollarization as a totally misguided measure and described the procedure the executive branch had used to push the new economic law through the National Assembly as deceitful.
In sum, the law polarized the country. The measure that the government paradoxically called one of "integration" only deepened the divisions in El Salvador’s already deeply divided society.

From social convulsion
to an earthquake

Salvadoran society was already convulsed when the January 13th earthquake, measuring 7.6 on the Richter scale, struck. Its epicenter was 60 km under the surface of the Pacific Ocean but only about 17 miles from the country’s capital. It rocked the entire country and dealt a mortal blow to the already battered lives of thousands of families. It brought the government a sigh of relief, however; the mounting protests against the dollarization were more frightening than any earthquake.

The earthquake surprised the civil society and FMLN activists preparing for nationwide demonstrations under the slogan, "Defend the colón, stop dollarization!" It changed the agendas of all governmental and nongovernmental organizations, as the anniversary of the peace accords found the government’s opponents busily engaged in emergency actions to aid the earthquake’s tens of thousands of victims.

The earthquake was one of the most powerful of the past century, not only because of its magnitude but also because the reach of its damage is unprecedented in Salvadoran history, according to those who have studied the matter. A month after the tragedy, the official death toll so far is 827, but the government has not yet agreed on official figures for the number of people disappeared or buried. Over a million people were severely affected, with nearly 150,000 houses destroyed or damaged. Although the quake damaged two-thirds of the country to some extent, the whole Pacific Coast strip suffered most. The departments of Usulután, La Paz and La Libertad were particularly hard hit, especially their rural areas. The middle-class neighborhood of Las Colinas, in Santa Tecla, reported the greatest number of people killed, when a landslide buried hundreds of houses.

Multiple vulnerabilities

The earthquake reminded us of the country’s fragility and revealed the various forms it takes. First of all, it is extremely vulnerable physically. Most of the country’s population centers are located in seismic zones, at enormous risk under any conditions. This is compounded by the fragility of the houses built in these areas. Poverty forces people to build with adobe, especially in rural areas, and this mixture of clay and mud has very limited ability to stand up against seismic movements. Houses also tend to be old, and time increasingly weakens these materials. Indeed, most of the houses destroyed by the earthquake were rural and were made of adobe, and in many cases, as in the eastern department of Usulután, had already been damaged by other quakes.

Adding to this physical vulnerability is environmental vulnerability. This problem stems in part from the country’s mountainous slopes and volcanic soils but also from the unsustainable way natural resources are used, leading to deforestation, erosion and inadequate construction of infrastructure. All of this is compounded by social and economic vulnerability, which has to do with both the organizational forms favored by the state and the attitudes of civil society itself, which too often spends more time lamenting than preventing.

Totaling up these factors makes it clear that the consequences of a natural phenomenon like an earthquake cannot be described as "natural." In addition to the seismic risks that characterize our country, so many other risks make life vulnerable in both urban and rural areas that we must speak of the country’s "structural vulnerability." Describing the January 13 earthquake as a "natural disaster" is not only irresponsible, but also a declaration of future impotence. It assumes fatalistic acceptance that no natural phenomena can be prevented and that all one can do is respond to emergencies as they arise and try to rehabilitate and reconstruct what has been destroyed.

According to a 1996 study by the Salvadoran Development and Environmental Research Program, the capital of San Salvador has been more severely affected by earthquakes than any other city in the Americas. The first one on record occurred in 1575, 30 years after the city was founded at its current location. Over the last three centuries, it has been hit by major earthquakes 14 times. According to the study, seismic movements in the volcanic chain that cradles San Salvador produced 9 of them while plate movements under the Pacific Ocean along a fault line that runs parallel to the coast just 30 miles away caused the other 5. The study concluded that these seismic conditions, coupled with the increasing vulnerability produced by the country’s ever more rapid and disorganized urbanization, would take a higher and higher human and economic toll. El Salvador and especially its capital are risky places, and there is no changing that, but human action can change the resistance capacity of the houses and other structures exposed to these seismic forces.

The government’s
insulting optimism

After sizing up the extent of the tragedy, Minister of the Economy Miguel Lacayo said that he still expected the country to meet its 4% projected growth rate for 2001, despite the fact that earthquake losses totaled over a billion dollars by official figures. "The quake will not have a negative impact on the economy, although it does mean that we will have to assume more debt," remarked the minister, a member of the government team behind the dollarization. The government responded to the January 13 disaster with the same suspicious optimism it used when announcing the imposition of dollarization.

Two days after the quake, responding to the anguish of many people who were still sifting through the ruins for people they had lost, President Flores said that "the worst is behind us." What does this government see as "the worst"? What kind of economic growth, to whose benefit and whose detriment, is the minister talking about? Their statements seem to confirm the prevailing economic model, which pays no attention to the poor or their tragedies, only to the macroeconomic figures projected by national and international capital. In the global economy, people’s tragedies are no more than minor episodes; one can pass by at a distance, leaving behind barely a little duly publicized charity.

Dollarization and the earthquake:
Two similar disasters

A few days after the disaster, a flyer was distributed around the country that made ironic, revealing comparisons between the effects of dollarization and the earthquake.

Both came as a fatal surprise, without warning or discussion. Both hit the poor and weak hard and left the rich and powerful untouched or nearly so. Both provoked panic and uncertainty among most people, and we can say for sure that both will give the rich and the poor more of what they already had: money for the rich, hunger for the poor. For El Salvador, both represented a painful entry into a new century and new millennium. Both put El Salvador in the international news for a few days. Both will give outsiders even more control of the country’s future. For most Salvadorans, both destroyed a familiar lifestyle and culture and threw them into an uncertain, unknown future while most would have preferred to continue living their lives as they had, without going through either experience. Both revealed President’s Flores’ arrogance, and both quickly paved the way for corruption and abuse. Both caught the country off guard, ill prepared and hard pressed to deal with the consequences. Both unmasked political parties taking advantage of the situation, more concerned about their own interests than people’s well-being. And both laid bare other basic, serious problems, while revealing that the governing class lacks the will even to face them, much less resolve them.

Tragedy in the Bálsamo range

Hundreds of people died in the landslide that came crashing down on the neighborhood of Las Colinas when the earthquake shook loose the side of a mountain in the Bálsamo Range, a few blocks from San Tecla’s urban center. Only after this tragedy did the country’s lawmakers resuscitate their discussions about protecting this mountainous region. The National Assembly’s Environmental Commission reopened a file on a case that had been languishing in the Assembly’s archives for nearly two years. In early 1999, the commission had sent a decree designating the whole range as a "protected zone" to the floor of the Assembly but it was voted down by 48 of the 84 legislators.

On January 22, nine days after the quake, the FMLN put the issue back on the table. The goal was to protect the range so as to avoid further urbanization and thus prevent tragedies like the one that occurred on January 13. One of the survivors of Las Colinas, who had been buried by the slide, said, "We protested to get them to stop building there, and now look at the result." Another neighbor, who lost his own family and witnessed the fate of 40 workers who were building a new neighborhood above Las Colinas the day of the earthquake, recalled with anger and pain how many times they had warned the builders to stop. "We told them they were loosening the ground, but they paid no attention. So there are the poor workers, crushed, buried, victims of the ambition of these construction companies and the government that protects them."
Another survivor of Las Colinas, after burying his wife and one of his daughters, told the media, "I hope that this tragedy serves a purpose, that it makes the government pay more attention. Those of us who lived in the neighborhood repeatedly denounced the damage being caused by the construction up on that slope. They put five big houses up there, each with its own pool. They also built a lot of access roads, and last year we heard a lot of explosions. All of this affected the land and we denounced what was happening several times, but they didn’t pay any mind." Another neighbor confirmed that dynamite was used in the construction work. "I hope they at least investigate and find out who was responsible."
Environmentalist Ricardo Navarro, president of the Center for Appropriate Technology, explained that governments and private businesspeople often resist drawing lessons from these tragedies. He said they had been warned years before of the danger of building in the Bálsamo Range, in precisely the area where the disaster happened, and recalled that protests had even been held in one of the streets that was buried. Navarro emphasized that, despite all these warnings, politicians and builders were swayed more by greed than by any concern for people’s lives. He insisted on differentiating the natural force of an earthquake, which cannot be avoided, from the stubbornness of people only concerned with their business deals and profits.

Pain and solidarity go together

In the midst of pain, solidarity has been decisive in helping people recover a certain degree of calm, hope and the will to keep living. As soon as the tragedy struck, hundreds of volunteers went to the areas that had been hardest hit. The first several days involved rescue work and the spontaneous organization of efforts to bring cooked meals to the victims, collect donations and care for the wounded. Meanwhile, people turned out in droves to offer their material support to aid organizations. Pain and solidarity came together. In places like the marginalized area of La Chacra, in the east of San Salvador, people spontaneously organized emergency committees to aid the victims. A week after the quake, La Chacra established an agreement with San Agustín, a town in Usulután whose houses and infrastructure had been destroyed. People from La Chacra organized volunteer brigades and offered to share the few resources they had.

While people mobilized in solidarity, the response of the National Emergency Committee (COEN) was strikingly inefficient and improvised. It never had enough personnel or rescue teams. Coupled with its centralist, authoritarian structure, the commission’s limited resources proved incapable of providing the Las Colinas victims any effective support. The fastest and most substantial aid to that neighborhood in the hours and days following the quake came from the spontaneous response of victims’ relatives and volunteer groups.

Inefficiency, empty rhetoric
and limited participation

At first, the government reacted by turning to big business. It organized the National Solidarity Commission (CONASOL), made up only of banking representatives, business leaders and ARENA politicians; other social and political sectors were noticeably absent. While building its initiative to respond to the disaster from this narrow field, the government waxed rhetorical about its solidarity with the victims and responded defensively to the criticisms and suggestions of groups and sectors that were not involved in either COEN or CONASOL.

Ten days after the quake, in response to the failure of COEN and CONASOL and especially to these criticisms and pressures, the government reversed its course. After totally ignoring municipal governments in its emergency response efforts, it decided to decentralize aid to the municipalities, calling on local government to assume the leading role. But there were strings attached. In an enormous publicity campaign, Flores announced that each family in the 98 municipalities most affected by the quake would be given the equivalent of $175 in a series of installments. The municipal governments would be in charge of the distribution. As usual, Flores made this decision without paying the slightest attention to the municipal governments involved. The mayors rejected the program, as was to be expected, arguing that the emergency programs should be drafted with their full participation to ensure that they were linked to the later reconstruction process. They also criticized the publicity campaign, insisting that it merely exacerbated the victims’ feelings instead of helping respond to the emergency.

NGOs: Poorly organized
and uncoordinated

The response of the nongovernmental organizations lacked organization and coordination. From the very start, a number of NGOs began to establish locations for storing donations, create structures to provide services to the victims, do censuses and deliver aid, often without even a minimal organizational structure or consulting the victims themselves. These responses momentarily palliated the need for food, blankets, medicine and emergency housing, but also contributed to the disorder and to a certain dependence and "get what you can" mentality among the victims, and thus complicated organizational processes in the communities.

With respect to international aid, the government of Mexico was the first to respond with specialized rescue teams, but many others quickly followed suit and some expressed their solidarity through the visit of a President or other high-ranking representative. A certain amount of this aid, however, was clouded by efforts to politicize it or capitalize on it to the benefit of partisan interests. At the end of January, the government and ARENA condemned the $65,000 that the Spanish Ambassador gave to the FMLN to distribute to victims through an organization created for this purpose. The FMLN’s internal conflicts burst out once again when Facundo Guardado, leader of its renovating current, decided to join a high-level government commission going to Spain to thank the government and present its new emergency program for aiding victims and rebuilding infrastructure over the coming months.

Central America’s
grassroots response

Four days after the earthquake, a container and three trucks arrived at the San José school, a donation collection center established by the Ignatian Emergency Network, which had been created by the various Jesuit institutions in El Salvador to respond to the emergency. The trucks were full of food, clothing, mattresses and many other things sent to poor Salvadorans by poor Hondurans from El Progresso, the very ones who had suffered so much from Hurricane Mitch just two years before.

A few days later, a brigade of 28 peasant farmers reached San Salvador from Tocoa, Honduras. They came to help clear away the debris, arriving in a truck filled with food for the victims. Honduran and Salvadoran peasant farmers from San Agustín, in Usulután, held a meeting to strengthen the solidarity ties that link the poor in times of pain and mutual assistance. When the indigenous community of Primavera del Ixcán in northern Quiché, Guatemala (one of the Communities in Resistance during that country’s war) heard about El Salvador’s disaster, they promptly collected the little corn they had and sent out a call to other communities to do the same. And they did, delivering it directly to the victims in El Salvador.

Second phase less centralist

On February 2, President Flores presented the country and the resident diplomatic corps with a proposal to expand the emergency response efforts. It consisted of investing over $100 million in provisional housing for 200,000 families, reconstruction of strategic infrastructure, risk reduction in particularly high-risk areas, and a jobs program to help the people affected get back on their feet. All this would directly benefit the communities most damaged by the quake and help prevent further destruction that might otherwise be caused by the beginning of the rainy season in April.

The government’s proposal is not to be implemented in the centralist, authoritarian way that characterized its first response to the emergency. For this second phase, the government is proposing a decentralized model in which municipal governments take the lead. The main criticism of the proposal is that it is not based on either a comprehensive vision of the country or a development strategy. The head of the FMLN bench in the National Assembly, Salvador Sánchez Cerén, suggested that Flores’ government should look beyond the emergency and beyond the big businesspeople and politicians in ARENA, and take into account the proposals being made by the various sectors of society.

Clearly, the main conflict that arose in the first weeks of the crisis was between the central government and the municipalities. In effect, the conflicts and confrontations that had erupted between the 84 FMLN municipal governments and the central government because of the dollarization policy spilled over into the earthquake disaster. After making the mistake of attempting to respond to a far-reaching emergency by relying on a small circle of ARENA politicians and big entrepreneurs, centralizing aid and decisions, the President has been forced to accept that he must turn to the municipal governments. This is still a struggle for him, however, because it is hard to achieve full understanding when the President and his team have a vision of the country and of citizen participation that differs radically from the one starting to emerge among FMLN mayors.

Mayors’ proposal

On February 3, the mayors, grouped together in the Corporation of Municipalities of the Republic of El Salvador (COMURES), released a document laying out a comprehensive local reconstruction and development plan for the areas affected by the earthquake. They propose creating an inclusive, national institution at the highest level, with representatives from the main sectors responsible for the reconstruction process: the central government, municipal governments, churches, private enterprise, NGOs and the National Development Commission.

The mayors propose reorganizing the barely functional Municipal Emergency Committees into Municipal Reconstruction and Development Committees, with full participation by all actors involved. Full they also propose that the national institution work towards a national objective in the short term by establishing a clear, holistic concept of local reconstruction and development. This concept should be presented at a national level so that efforts can begin immediately to seek financing and technical cooperation. The policy defined on the basis of this concept should encourage decentralization and modernization of the state, as well as local and municipal autonomy and institutionality.

COMURES proposes that reconstruction focus on creating housing projects as soon as possible, with widespread municipal participation and government support. They should be based on principles of solidarity, sustainability and dignity, in which basic services are provided to the houses and a fair repayment plan offered for those cases where repayment is possible. To ensure that decentralization is effective, they specifically propose the provision of intensive technical assistance to strengthen local capacities, which should include everything from reviewing local development plans to constructing and administering the infrastructure involved.

All well as ensuring that reconstruction and development include increased inter-institutional coordination and monitoring by the various national, departmental and municipal organizations involved, COMURES’s proposal touches on several other essential issues. Since not all institutions and organizations involved are legally established, this must be guaranteed, with clear rules for participation and action. A national reconstruction and development fund must be created that uses existing capacities and procedures in the central and municipal governments, making the most of the advantages that flexible administration and local implementation offer, thus consolidating institutionality and ensuring efficient, effective actions. At the same time, land use legislation must be passed that is socially, economically and environmentally balanced, in accord with the goals of state modernization.

Poorer, more divided
and more inequitable

Other sectors of civil society have proposed that the starting point should be a collective consciousness raising regarding the fact that the earthquake has left the country poorer, more divided and dispersed, and more inequitable. Given this reality, a worthwhile objective for one stage of the reconstruction process is to strive to regain the country’s pre-earthquake level of per-capita income. At the same time, however, it is essential to pay attention to the problem of inequality. If a poor country is to develop in a just, equitable way, it cannot maintain such exorbitant differences between its most powerful sectors and those who have nothing, as in El Salvador. The country’s reconstruction programs thus cannot be limited to restoring things to the way they were before the quake; we must rather aim to rebuild the country with greater justice. To be exclusively concerned with economic growth—as when the minister of the economy assured that the country would meet its projected 4% growth rate this year—is to give society’s wealthiest sectors an absolute advantage, allowing them to capitalize on the tragedy and enjoy the fruits of economic growth. The country needs a different perspective, along with imagination and creativity, because it was poor even before the earthquake struck and the policies that were applied were irresponsible and excluding.

A pending revolution

El Salvador needs a moral reconstruction from the ground up to ensure that its institutions function. Much of the responsibility for the disaster caused by the earthquake—in Las Colinas, for example—can be attributed to the corruption and impunity of more than a few public officials, and the slow or virtually nonexistent operation of the state’s legal institutions. In defining new programs, the morality and operations of institutions must be considered in tandem. At best, reconstruction projects that do not take human responsibility and public institutions into account can only restore the situation as it stood before the earthquake. And this means that we will only reproduce the same corruption and immorality that contributes to new human and social disasters.

Most Salvadorans, like most other Central Americans, are permanently vulnerable, surviving with no protection. We must learn to prevent; there is no other way ahead. Given this challenge, reconstruction must get to the source of social fragmentation. Disasters like the one on January 13 reopen our eyes. If we want to lay the foundation for a kind of development in Central America that shortens the immoral, inhuman distance between the wealth of a few and the calamity of the majority, we must unite the dispersed forces. We must bring together the efforts of state and civil society, private enterprise and the international community. This bold but peaceful revolution is still pending for Central America’s heroic, exhausted societies.

Civil society’s participation in this "revolution" should not be rhetorical or limited to its leaders. The beneficiaries of any reconstruction program should be involved from the very start, independent of the political parties. Only through autonomous, independent participation can true dialogue among civil society, political parties, private enterprise and the government be ensured .

The disaster wrought by the earthquake in El Salvador is a painful result of the structural disaster represented by the inability thus far to build a society based on equity, justice and participation. But this disaster could be transformed into an opportunity for civil society to assume the leadership it never had, has never been allowed. And this could change things.